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Moeed Yusuf October 2025 Going Against the Grain: Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos

Content Introduction ......................................................  1 Is Pakistan’s Conception of Geoeconomics Still Relevant? .................  3 Pakistan’s Conundrum ...........................................  4 Implementation of Pakistan’s Geoeconomic Vision ......................  7 National Commitment to the Geoeconomic Pivot .....................  8 Structuring Economic Diplomacy ...................................  9 Reimagining Regional Connectivity ................................  26 Enabling Geoeconomic Success through Soft Power Projection...........  36 Conclusion ......................................................  38

Introduction In a previous report, Pakistan’s Geoeconomic Pivot: Strategies, Opportunities, and Challenges, 1 co-authored with Rabia Akhtar, I had unpacked the concept of geoeconomics in Pakistan’s context. The need was felt as Pakistan’s National Security Policy(NSP), 2 which espoused a geoeconomic vision as a supplement to geopolitics, did not crystallize the concept in any detail. Pakistan’s Geoeconomic Pivot did so, explaining the thought behind the vision. The concept of‘cooperative geoeconomics’ adopted by the NSP was highlighted, as was its stark contrast with the more prevalent Machiavellian use of the term. The report analysed the two key pillars of Pakistan’s geoeconomic vision aimed at creating positive interdependence with other countries:(i) focus on development partnerships through goods, services, and labour exports and foreign direct investment(FDI) rather than depending on foreign bilateral and multilateral assistance as the mainstay of the country’s development model; and(ii) position Pakistan as a regional connectivity hub. The logical sequel to this effort is to highlight ways to successfully implement the geoeconomic pivot. This is especially important given that Pakistan’s track record in execution of policy choices – especially those that require a major departure from the status quo – has been dismal. But there is now also need to address a more fundamental question on the viability of a policy framework conceived and approved in the pre-Donald Trump era. Fresh questions over the relevance of geoeconomics, as conceived in the NSP, must also be raised in the wake of the India-Pakistan conflict in May 2025 3 that has caused a further setback to the prospects for regional cooperation in and around South Asia. 1  Moeed Yusuf and Rabia Akhtar, Pakistan’s Geoeconomic Pivot: Strategies, Opportunities, and Challenges, 2023, https://library.fes.de/pdf-files/bueros/pakistan/20682.pdf. 2  National Security Division, National Security Policy 2022-26, Government of Pakistan, https://nsd.gov.pk/SiteImage/Downloads/NSP%20Policy%20(1).pdf. 3  Christopher Clary, Four Days in May: The India-Pakistan Crisis of 2025, Stimson Center, May 28, 2025, https://www.stimson.org/2025/four-days-in-may-the-india-pakistan-crisis-of-2025. Going Against the Grain: Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 1

This paper focuses on explaining the relevance of Pakistan’s geoeconomic paradigm in the present global and regional environment and the changes this context may necessitate. In doing so, the paper seeks to address some of the misconceptions about the relevance of cooperative geoeconomics for Pakistan in the times ahead, and establish how to best prioritise and implement its various aspects. The mainstay of the paper, which follows, is an implementation guideline that policy makers can build on to pursue the vision in earnest. The paper ends by highlighting the need to enable geoeconomic success by working to change Pakistan’s negative international perception that deters positive economic engagement by many foreign governments and private sector investors. 2 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Is Pakistan’s Conception of Geoeconomics Still Relevant? Produced only three years ago, there are legitimate reasons to question the relevance of the direction of Pakistan’s NSP in general and the geoeconomic paradigm in particular. Since Donald Trump’s return to the U.S. Presidency, the world has witnessed an abrupt, shock and awe approach from Washington that has struck at the heart of the liberal international order and its associated globalisation project. Trump has made his intent to transform the post-World War II global alliance and trade architecture amply clear, advocating a retreat to protectionism for the U.S. The inevitable cascading effect of America’s new posture is already causing great concern across capitals, both those traditionally aligned and opposed to the U.S. One obvious outcome, already being openly purported by multiple countries, is a return to weaponising economic tools as part of hardnosed power politics. Political games are dominating economics and relative gains are once again becoming more important than absolute welfare tied to economic cooperation. 4 Such a context naturally casts a shadow over a national vision anchored in economic interdependence, especially for a country like Pakistan that is situated in an extremely troubled neighbourhood. While there is no denying that national calculations around the world are being recalibrated towards Hobbesian self-help, most countries are not endowed with sufficient resources or leverage to be able to do so successfully. The application of competitive geoeconomics varies based on the relative power a country can exercise. Pohl points out that the ongoing shift from a universal set of rules to “fragmented contest for control” has created four strategic battlegrounds of economic warfare:(i) critical industries;(ii) financial and monetary infrastructure as economic leverage;(iii) resource control, which includes rare earth elements and critical minerals and energy and green transition technologies; and(iv) digital and cyber infrastructure. 5 Virtually all countries able to invest in these spaces will do so, but only those who can compete with the dominant powers in these battlegrounds stand a chance of maneuvering these to their advantage. The rest 4  Tett, Gillian,“Welcome to the New Age of Geoeconomics,” Financial Times, May 9, 2025, https://www.ft.com/content/daf5ce11-c95b-4964-8df1-7463f0f9a81b. 5  Jens Hillebrand Pohl,“Economic Security in a Post-Ideological World: Power Reality, Narrative Collapse, and Europe’s Strategic Drift,” Remarks delivered at Sciences Po, March 8, 2025. Going Against the Grain: Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 3

must remain global standard takers and either avoid getting caught in the crossfire or seek protection from one(or more) of the stronger states. Weaponising economic tools on their own will not be a realistic option for them. It would be akin to one seeking to project hard power without a military capability. Pakistan’s Conundrum As a highly indebted, weak economy whose growth model has been intrinsically tied to foreign aid and inflows linked to regional conflict, Pakistan is squarely in the camp of standard takers across all four identified economic battlegrounds. Moreover, given Pakistan’s simultaneous economic dependence on China(for economic inputs) and the U.S.(for economic outputs), it cannot pick one camp against the other without first fundamentally reorienting its economic linkages with either Beijing or Washington. This reality makes cooperative geoeconomics even more – not less – important for Pakistan in a Trumpian world. Without a chance to compete in the big league of competitive geoeconomics, creating positive economic and security interdependence with multiple important global and regional countries stands out as the only viable path to avoid becoming a proxy battleground for great power contestation. The goal must be a multi-aligned foreign policy able to generate genuine stakes in Pakistan’s stability in enough meaningful global capitals, including Washington and Beijing. The explicit recognition of the importance of developing stakes of other countries in Pakistan’s success by the NSP is often overlooked by sceptics of geoeconomics. The NSP put the cooperative geoeconomics framework squarely in the realist camp of international relations. It already caters for the intensifying hard security concerns and militarisation of conflicts around the world. In fact, it accepts the premise that several other countries and interests do not wish to see Pakistan’s economic revival and perceive Pakistan’s instability as beneficial to their interests. Precisely this concern led the framers of the NSP to conceive a framework that would maximise the cost of an unstable Pakistan for such actors, thereby providing Pakistan the necessary space to focus on economic security. The alternative of applying a hardnosed competitive geoeconomic lens can only come about in one of two ways: either, Pakistan has enough economic tools to weaponise and use them to force behavior change in other capitals; or, it must side with one or the other great power camp to seek protection as it drives hard 4 Friedrich-Ebert-Stiftung(FES) Pakistan Office

bargains with others. The former is not realistic and the latter will inevitably accentuate negative energies of the opposing great power camp. It would turn Pakistan’s prized location into a liability, as was the case during the 1980s and post-9/11 when Pakistan led with a hard security-first approach to manage re gional conflicts. The likelihood of efforts by adversaries to undermine Pakistan will be even greater in today’s world where international law regimes and diplomatic norms against forcible measures by the mighty are fast eroding. That said, the fact that the core premise and utility of Pakistan’s geoeconomic vision remains intact does not imply that the inevitable implications of global and regional changes should be ignored. The present government’s push to accord greater importance to hard security measures in countering Pakistan’s threat matrix is already discernable. 6 While understandable, doing so will at times create some tension with the requirement of promoting economic interdependence. It will be important for Pakistani policy makers to ensure that tradeoffs that negatively affect any aspect of the geoeconomic pivot are made only when absolutely necessary. Another major development that will directly impact the practicality of the regional connectivity pillar of geoeconomics is the May 2025 crisis with India. New Delhi’s behaviour has all but confirmed Prime Minister Modi’s government’s lack of interest in improving relations with Pakistan. 7 So obvious is the Indian regime’s motivation to handle issues through coercion that a positive shift in bilateral relations is all but inconceivable as long as the current Indian mindset remains intact. Pakistan cannot afford to wait. Therefore, while continuing to signal its interest in a civilised relationship and remaining committed to it, Pakistani decision-makers will have to simultaneously work on a‘minus-India’ formula for regional cooperation. Moreover, in as much as the development partnerships pillar of geoeconomics is dependent on trade, foreign investment, and labour export, there will be a need to recalibrate Pakistan’s comparative advantage in a protectionist and anti-immigration world. Virtually the entire Global South is having to rethink these as6  Jon Grevatt and Haridass Sankar,“Pakistan Announces Defence Budget Increase,” Janes, June 12, 2025, https://www.janes.com/osint-insights/defence-news/industry/pakistan-announces-defence-budget-increase. 7  Operation Sindoor: India has Only Paused Military Action, PM Modi Warns Pakistan,” Times of India, May 13, 2025, https://timesofindia.indiatimes.com/india/operation-sindoor-india-has-only-paused-military-ac tion-pm-modi-warns-pakistan/articleshow/121118102.cms. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 5

pects of their respective economies. While these are unwelcome disruptions, with obvious short-term costs, the global fluidity is bound to offer fresh opportunities as well. It is critical for Pakistan to identify these and capture the early-mover’s advantage. The bottom line is this: as conceived, Pakistan’s geoeconomic vision advocated a major paradigm shift. It was never going to be easy to pursue. The task has only gotten harder in the Trumpian era. And yet, to move away from it now requires a viable alternative. Those who consider cooperative geoeconomics unworkable in light of the existing global dynamics need to provide an alternative strategic vision that allows Pakistan to fulfill its economic security needs while being protected from the fallout of great power contestation. One of the key reasons for the NSP to be formulated in the first place was a recognition that a business as usual, reactive foreign policy and economic orientation was no longer tenable in the face of the approaching geopolitical storm being stirred up by the intensifying U.S.-China contestation. This reality is even starker now. In such an environment, nothing could be worse than a Pakistan caught in no man’s land – notionally committed to cooperative geoeconomics but unwilling to remove the internal policy contradictions that are holding back its successful execution. 6 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Implementation of Pakistan’s Geoeconomic Vision This section builds on the three aspects necessary to operationalise the geoeconomic pivot: • Need for commitment to pursue the pivot in earnest • Prioritising economic diplomacy as the principal tool for achieving objectives related to development partnerships • Reimagining connectivity in the new regional and geopolitical context Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 7

National Commitment to the Geoeconomic Pivot There exists a discernable lack of clarity on how committed Pakistan’s decisionmakers remain to pursuing the geoeconomic vision, and more broadly, the NSP. The civilian administration has never owned the NSP publicly although senior officials have continued to promote its main thrust lines. 8 The NSP also continues to be debated as the officially sanctioned policy approach to national security at civilian and military training institutions and by publicly funded think tanks. One major challenge communicated to the author is that publicly owning a policy document as consequential as the NSP which was produced by a previous government is not natural for Pakistan’s parochial political landscape. If so, the easiest solution would be to formally revise the NSP, incorporating any new elements the present government wishes to, while retaining the centrality of cooperative geoeconomics. The NSP already provisions for an annual review and the current version is set to expire in 2026. The government could initiate an exercise to update and issue a new document even prior to its expiration next year if it so chooses. Doing so would allow the leadership to own the new NSP fully and address the skepticism about their commitment to it. The National Security Division(NSD), the official custodian of the NSP in the federal government, should be empowered to formally start the process of updating and revising the document. To ensure a successful process, it should repeat the exhaustive, inclusive and consultative approach among relevant federal and provincial ministries and expert working groups adopted during the original policy’s formulation. The NSD, also responsible for overseeing and ensuring implementation of the NSP, should then be held accountable for its execution. The Office of the National Security Adviser(NSA) could furnish a monthly report on the progress to the Prime Minister. 8  Abdullah Momand,“Pakistan’s Foreign Policy Focuses on Geo-economics, Peace: Dar,” Dawn, June 30, 2025, https://www.dawn.com/news/1921206/pakistans-foreign-policy-focuses-on-geo-economics-peace-dar. 8 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Structuring Economic Diplomacy Economic diplomacy is the art of using a country’s political relationships and international leverage to generate economic gains. Pakistan has traditionally relied on political diplomacy centred on its geostrategic importance and utility as a hard security partner to cultivate partnerships and seek financial inflows into the country. The envisioned shift from assistance-based relationships with a handful of patrons to development partnerships, and the use of its location to create positive interdependence by highlighting Pakistan’s utility as a partner willing to offer economic rather than military bases to the world requires a heavy focus on economic diplomacy. As situated today, Pakistan’s federal government and federal-provincial coordination mechanisms are fundamentally ill-equipped to pivot towards an economic diplomacy-led foreign policy. In fact, there is even lack of clarity on what constitutes economic diplomacy, and which institutions are responsible for executing it. Traditionally, the economic diplomacy domain has been narrowly defined and limited to export of goods and traditional services. Only the ministries of Commerce(MOC) and Foreign Affairs(MOFA) have been involved for the most part, and even here institutional turf battles have regularly undermined a synergetic approach. Most other ministries readily accept that they have no comprehension of how they fit in even if they are performing functions that are critical to economic diplomacy. The very nature of economic diplomacy requires a whole-of-government approach, with extensive coordination across various federal and provincial ministries. Presently, the federal government lacks a designated office or official responsible for such substantive coordination. In terms of a way forward: Step 1: A principal coordinating ministry/office that does not have a direct role in its execution must be designated as the economic diplomacy czar. At the time of formulation of the NSP, the Office of the NSA played this role, with the NSD acting as its secretariat. The Division has since been rendered ineffectual. This needs to be reversed or an alternative coordination hub empowered and held accountable for outcomes. In the absence of an empowered NSD, the only other plausible hub could be the Deputy Prime Minister’s Office as it presumably wields authority over line ministries. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 9

Step 2: To prioritise economic diplomacy, the Prime Minister should formally launch a dedicated Economic Outreach Initiative(EOI) focused primarily on the development partnerships pillar of the geoeconomic paradigm. An apex body comprising all federal ministries that have a substantive role in economic diplomacy ought to be formed under the coordinating office’s head. This apex body will provide a common platform for all ministries to synergise efforts, agree on strategic targets for economic diplomacy, and determine specific Key Performance Indicators(KPIs) for international economic outreach. The apex structure is to be seen as a collating and funneling mechanism across government rather than as an additional bureaucratic layer or substitute for existing ministry-specific decision-making bodies/Boards. All ministerial structures will continue to function in their respective domains but their output will be channeled to the whole-of-government apex mechanism for better coordination. The ministries will be represented by the federal secretaries and the provinces will designate their nominees(in addition to the presence of the Secretary, Inter-Provincial Coordination who will be empowered to coordinate with the relevant provincial bodies) to the apex body. Among the ministries, MOFA, as the principal agency in charge of all international missions, will have the most important role. To perform this function, it will need to enhance its own capacity. It should consider creating a dedicated division with a new position of Special Secretary for Economic diplomacy heading it. This will ensure the effort receives the necessary focus. Ministries to be included: • Ministry of Foreign Affairs(MOFA) • Ministry of Commerce(MOC) • Ministry of Finance, Revenue and Economic Affairs • Ministry of Planning, Development& Special Initiatives(PD&SI) • Ministry of Information Technology and Telecommunication(MOITT) • Ministry of National Food Security and Research(MNFS&R) 10 Friedrich-Ebert-Stiftung(FES) Pakistan Office

• Ministry of Defence Production(MODP) • Ministry of Industries and Production(MOIP) • Ministry of Overseas Pakistanis and Human Resource Development(MOPHRD) • Special Investment Facilitation Council(SIFC) • Board of Investment(BOI) • Provincial representatives Step 3: A working level group with representatives of members of the apex body will be responsible for day-to-day coordination among all relevant federal and provincial institutions. This group will ensure implementation of specific targets and personnel KPIs as approved by the apex body. Its Terms of Reference could include: a. Produce an action plan with clear timelines to achieve EOI objectives b. Produce a comprehensive mapping of international demand across all goods and services sectors relevant to exports, FDI and labour export for Pakistan’s economic outreach at the global, regional, sub-regional, and bilateral levels c. Prioritise countries and sectors for each priority country to target avenues with the greatest potential returns d. Identify domestic and international actions/support needed to improve Pakistan’s comparative advantage in line with its geoeconomic vision in as many sub-regions/countries as possible, focusing primarily on the prioritised regions(based on mapping of international demand) e. Identify relevant human and material resources(and/or need for their reallocation) required for the EOI’s success Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 11

f. Identify short, medium, and long-term training needs for individuals/institutions involved in the EOI domestically or in Pakistan’s missions situated in the prioritised countries g. Establish KPIs that reflect performance appraisal criteria in line with the EOI’s goals and objectives h. Identify any changes in the regulatory or legal framework required to make the EOI a success To acheive these objectives, it will be necessary for all involved stakeholders to directly and regularly liase with the private sector to receive necessary input and guidance. Without their active involvement and counsel, it will be impossible to attain the desired results. Step 4: Economic diplomacy is a specialised field – and increasingly so. Trained and equipped human resource with the right aptitude is necessary to pursue economic outreach objectives. Here again, the fundamentals are not in place. The training and orientation of Pakistan’s foreign service has been focused on political diplomacy while Trade and Investment Officers(TIOs) who are principally responsible for commercial outreach in the country’s missions abroad are recruited from across the civil service. Most lack any background or specialisation in economic diplomacy. 1. The recruitment criteria of TIOs needs to be revised, with a more liberal view towards hiring private sector individuals well versed with the commercial sectors relevant to Pakistan in a particular country. There is no bar on such recruitment but it has been used sparingly to date due to opposition from the bureaucracy. These individuals can be from Pakistan or be members of diaspora from the host country. In addition, the government should consider hiring host-country firms that specialise in commercial deals in particular sectors of interest on a commission/profit-sharing basis. This is necessary because no individual counselor or team of counselors can have a comparative advantage in marketing products and services as diverse as IT, textiles, medical tourism, etc. While Pakistan’s extremely low diversification of exports and investment-friendly sectors is certainly concerning, it also makes this human-resource model feasible, as the number of sectors requiring coverage is is fairly small. 12 Friedrich-Ebert-Stiftung(FES) Pakistan Office

2. Simultaneously, a process needs to be instituted whereby all designated ambassadors and TIOs are required to spend at least two months formally attached to the BOI, SIFC, and/or MOC/ Trade Development Authority of Pakistan(TDAP)(and other relevant agencies), and to the private sector associations most relevant to the country they are being posted to. Before they take over their new assignment, they should not only be well versed with the commercial opportunities but also understand the existing concerns and experiences of the private sector engaged with the particular country. The private sector can also help create the initial connections and networks for these officers in their country of assignment. 3. A more sustainable change in the longer run requires a new orientation in all civil service training institutions. The Foreign Service Academy will be critical in ensuring an increased emphasis on economic diplomacy(while continuing the focus on traditional diplomacy). The civil service’s in-service training roles must also be tailored accordingly for all personnel relevant to economic outreach. Moreover, officers from the Commerce and Trade Group should be specifically groomed for these tasks and only they should be eligible to serve as TIOs(apart from private sector) in key foreign capitals. An example of the kind of information all agencies may be asked to prepare for the EOI is depicted in figure 2. This exercise will not only allow the economic outreach coordinating office to streamline tasks and needs but specific KPIs for all relevant individuals serving in relevant positions in Pakistan or in foreign missions can also be derived from the input received. Aggregate KPIs for all ministries may also be collated through this process. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 13

The Economic Outreach Initiative Figure 1 Define overarching objectives Monitor progress through coordinating office HR Training Appoint Mission staff according to Economic Diplomacy needs ....................................... Economic Diplomacy Set targets and define KPIs Identify coordinating office and set up apex/ working bodies Map international demand and associated needs 14 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Example of Information to be Solicited from EOI-relevant Agencies 1. Countries important to your Ministry/Department for Figure 2 a) Existing export/import of goods& services b) Future export/import of goods& services c) Foreign investment areas; list of key future projects Explanation: i) identify exports of goods& services and FDI potential ii) focus on the top 5 2. Provide targets of 1. a) b) c)(in monetary and quantity terms); broken down in 3, 6, 9& 12 month periods 3. What local support/adjustments would[Your Ministry/Department] need to help achieve the intended targets? Capacity Enhancement Inter Min./ Dept. Coordination Human Resources Financial Resources Regulatory/ Legal Changes Other Strengthening Exports and Investment through the Economic Outreach Initiative As originally envisioned, development partnerships as part of the geoeconomic pivot primarily focus on avenues for non-debt raising foreign exchange, namely exports, FDI, and labour exports that translate into remittances downstream. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 15

Exports Pakistan’s exports in goods and services stand at 27.3 USD billion. 9 While this number has grown by 56 per cent since 2016-17, 10 it remains abysmal for a country of Pakistan’s size and potential. Moreover, in periods where exports have grown, the imports also ballooned, resulting in higher Current Account Deficits. This makes for an unsustainable growth pattern as the economy continues to suffer from boom-and-bust cycles. As Pakistan seeks to facilitate and diversify exports to new and potential marketplaces and move to value-added exports, it must do so through a sustainable export model. The disruption to the global trading regime caused by America’s new policy, while rightly causing great concern among trade economists, provides an opportunity for a fresh start for countries like Pakistan that had lagged behind in the WTO era. Pakistan should look to reset its trade and investment relationships by aligning its comparative advantage with the demands of the new protection-oriented global economy. A reconfiguration of the trade orientation must go beyond tariff negotiations with the U.S. to new avenues for trade. The MOC’s Strategic Trade Policy Framework(STPF), 2020-25 focuses on 18 priority emerging and estab lished sectors. 11 The starting point would be to update this list and all relevant sectoral policies that underpin exports through a comprehensive review exercise. This effort will naturally provide the groundwork for the next iteration of the STPF due in 2026. The following could be instituted under the EOI specifically for export enhancement. While much of this work has been done in the past, a revision is now required if Pakistan is to benefit from the fast-transforming global trade landscape: 9  Ministry of Finance, Pakistan Economic Survey 2024-25, Government of Pakistan, https://www.finance.gov.pk/survey_2025.html. 10 Ministry of Finance, Pakistan Economic Survey 2016-17, Government of Pakistan, https://www.finance.gov.pk/survey_1617.html. 11 Ministry of Commerce, Strategic Trade Policy Framework 2020-25, Government of Pakistan, https://www.commerce.gov.pk/wp-content/uploads/2024/07/Final-STPF-2020-25.pdf. 16 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Step 1: Updating strategies and devising targets • Updating short and long-term sectoral strategies to increase exports in the traditional and emerging sectors • Identifying the key stakeholders/ministries and coordination mechanisms Step 2: Mapping international demand • Comprehensive mapping to determine country/sector-wise potential across Pakistan’s export spectrum • Prioritisation of products and services for exports for each important country/region • Identification of new markets/countries with significant potential • Specific and time-bound export targets Step 3: Setting KPIs • Specific export-related performance indicators for the diplomats and TIOs in international missions • Aggregate export-related performance indicators of each relevant ministry Step 4: Finalising human resource allocation • Need-based assessment for human resource requirements in international missions(country-wise) • Hiring/ posting of professional and sector-specific TIOs in the missions • Posting sector experts in the priority sectors/countries Facilitating the Top Exporters As part of this effort, a parallel complementary initiative should be undertaken to increase export volumes in the short to medium term. This would entail enImplementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 17

gaging with Pakistan’s leading exporters in traditional goods and established services. The approach recognises that only the top exporting houses of Pakistan can potentially generate additional production and output competitively in a short period of time. Success will be predicated on the commitment by the EOI coordinating ministry/office and the Prime Minister to facilitate these exporters and resolve the specific ease of doing business and other related issues that may hold them back. 12 Concretely, the EOI apex body would agree to specific export enhancement targets with each exporter. The apex group would meet these exporters regularly and employ a whole-of-government approach to remove every problem they face. The most complicated issues like high energy costs coupled with increasing financing costs that deter the export businesses and their potential expansion will have to be tackled, even if this means creating temporary exceptional schemes for these actors. The Prime Minister would need to demand regular updates and chair meetings as needed to ensure success. This model was successfully piloted in the Prime Minister’s office during the 2020-22 period. Lessons can be drawn from that experience to improve outcomes. To be sure, the proposed approach is no substitute for long-term reform and facilitation that allows the private sector greater space to expand while the public sector pulls back from over-regulating economic activity. This deeper concern needs to be addressed in tandem. Foreign Direct Investment Pakistan’s FDI figures are as dismal as its exports. FDI has averaged a mere$2 billion over the past decade. 13 The government set up the SIFC in 2023 to pro vide a one window operation for investment facilitation, a task otherwise assigned to the BOI. Since SIFC’s creation, there has only been a marginal increase in the net FDIs. 14 Deep-rooted governance and administrative challenges, high 12 The origins of this idea come from former Chairman, Export Promotion Bureau of Pakistan, Tariq Ikram. For his views on the subject, see“Increasing Pakistan’s Non-Debt Raising Forex Inflows to$100 bn a Year: An Action Plan for Prioritizing Specific Goods and Services Exports.” In Navigating Public Policy, 2024, 1st ed., 30–36, Beaconhouse National University, 2024. 13“Statistics| Board of Investment,” 2025, https://www.invest.gov.pk/statistics. 14 United Nations,“Human Development Report 2025,” Human Development Reports, May 6, 2025, https://hdr.undp.org/content/human-development-report-2025. 18 Friedrich-Ebert-Stiftung(FES) Pakistan Office

cost of doing business and policy inconsistency deter investor’s confidence and trust in the system. The situation is getting worse as any positive effect of marginal overall increases in inflows are being offset by declining foreign private investment and a stream of international firm exits from the Pakistani market. 15 Structurally, the SIFC, now a formal division of the Federal government, offers a one-window arrangement. It should be further harnessed. However, more needs to be done to create buy in for the entity among the civil bureaucracy and ensure that entities like the BOI and its provincial counterparts are both fully aligned and operate synergistically with it. To achieve this, it will be important to remove confusion and institutional turf issues by clearly delineating the division of labour between these organisations. SIFC’s approach towards investment promotion which entails identifying the key sectors, sub-sectors, and ultimately specific projects to attract investment is notionally the correct one. Its priority sectors, agriculture and livestock, IT and telecom, energy, mining and minerals, and industry, tourism and privatisation are also intuitive. 16 Background work that has been conducted includes: • Assessment of present FDI across the country • Prioritisation of the projects in the provinces/federal capital • Developing viable business cases for specific projects in the key priority sectors • Mapping of previously unidentified investment potential International consultants are working on producing attractive pitch decks, which will then have to be marketed through trained human resource abroad. The focus of these efforts has to be beyond G2G arrangements, where SIFC has made the most progress thus far. Moreover, in as far as the goal of achieving net for15 Muhammad Azfar Ahsan,“FDI Fatigue: The Exit Behind the Entry,” The Friday Times, July 24, 2025, https://thefridaytimes.com/24-Jul-2025/fdi-fatigue-the-exit-behind-the-entry. 16“Special Investment Facilitation Council,” accessed July 17, 2025, https://www.sifc.gov.pk/. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 19

eign exchange gains is concerned, Pakistan must prioritise FDI tied to export enhancement rather than the consumer market. To do so, Pakistan needs to develop stronger relationships with the international business community and the private sector in order to pitch feasible and bankable export-oriented projects with rational Return on Investment(ROI) projections. This would help attract FDI aimed at enhancing local capacities, and in turn export growth. There is also need to focus attention on FDI retention rather than only looking at fresh inflows, since the latter could often be triggered by desires for short-term arbitrage opportunities. Sustained FDI is impossible without strong investor confidence. 17 More work is needed on: Data and operational coordination • Synchronisation and consolidation of data of the federal and provincial initiatives by the respective BOIs • Coordination mechanism(s) between the SIFC, BOIs and the international investors Incentives for investment in priority sectors • Tax rationalisation and waivers/relief for the potential investors in the prioritised sectors • Long term and sector-specific monetary and non-monetary incentives like credit or financing facilities Infrastructure and connectivity • Provision of infrastructure, utilities(electricity, gas, roads, etc.) and connectivity to Special Economic Zones(SEZs) and Special Technology Zones(STZs) • Resolving the issues related to digital connectivity • Fast-tracking processes and resolution of other administrative impediments affecting infrastructure and connectivity at the federal and provincial level 17  Ahsan,“FDI Fatigue.” 20 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Regulatory reforms • Reducing red tape and introducing bureaucratic reforms • A more comprehensive regulatory guillotine exercise to ensure further simplification and expedition of business processes like NOCs, licensing, and security clearances/ approvals • Ensuring transparency in taxation and licensing • Clear profit repatriation rules and their consistent application International dispute settlements/Arbitration • Assessment and gap analysis of the presently agreed upon international dispute settlement mechanisms with investors/countries • Legal protection for investors and facilitation for intellectual property rights • Expedition and mutually-agreed settlement mechanisms of the existing legal cases involving key FDIs by foreign countries/investors Moreover, the government has to ensure policy consistency, without which no investor interest will last. Inability to ensure policy continuity has been a major failing of Pakistan’s investment regime. A turnaround in this regard requires political will and a public commitment to stable economic/financial policies that give investors the comfort that Pakistan has left behind its perennial problem of abrupt policy U-turns, often to the detriment of foreign investors. Just like for exports, the apex body of the EOI will oversee outputs and outcomes with regard to investment and help facilitate SIFC’s work. Specific KPIs for investment will accompany those for exports and missions abroad will be tasked through their chain of commands to achieve specific targets, as will relevant ministries at the aggregate level. . Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 21

Labour Exports Pakistan’s most predictable surplus is its human resource. Nearly 250 million people strong, and tipped to be over 400 million in 2050, 18 Pakistan’s ability to export labour is virtually unlimited. The remittances this export generates downstream has been an important lifeline for Pakistan’s economy, closely tracking goods exports in certain years. Workers Remittances to Pakistan (USD Billions) Table 1 KSA UAE UK USA Total 2019 5.6 5.0 3.0 2.4 16 2020 7.3 5.7 3.2 2.1 18.3 2021 7.8 6.2 4.3 2.9 21.2 2022 7.2 5.4 4.3 3.2 20.1 2023 6.2 4.3 4.0 3.1 17.6 2024 8.5 6.7 5.1 3.7 24 Source: State Bank of Pakistan, 2025, https://datafest.data.gov.pk/Sbp/Index Pakistan suffers from a twin problem with regard to labour exports. First, overwhelming majority of its human resource abroad is unskilled or semi-skilled and concentrated in the Gulf. This implies low per capita earnings, and in turn, remitting capacity, among Pakistani diaspora. More importantly, the absent or marginal skillsets of Pakistani diaspora risk leaving them at a major disadvantage in international markets in the times ahead as automation and artificial intelligence transform jobs and replace human need for tasks performed by unskilled labour. Second, at the other end of the spectrum is the concern about the brain drain caused by the smaller number of highly skilled labour leaving the country. The issue has gained salience in recent years as political and economic uncertainty in the country has created a rush for emigration and abnormally high outflows, with 18 UNFPA Pakistan,“State of World Population Report Provides Infinite Possibilities for Pakistan,” 2023, https://pakistan.unfpa.org/en/news/state-world-population-report-provides-infinite-possibilities-pakistan. 22 Friedrich-Ebert-Stiftung(FES) Pakistan Office

over 700,000 workers migrating just last year. 19 However, trying to hold people back is neither advisable nor likely to work. The only sustainable solution to the problem is to invest heavily in mainstream and vocational education to ensure that a healthy pipeline of moderately- and highly-skilled Pakistanis is available to be absorbed both in the domestic and international markets. The country will continue to have surplus supply; the challenge is to upskill them appropriately. In terms of EOI, the main priority has to be a targeted approach to train youth vocationally with requisite skills for countries with aging populations. This segment of exportable human resource is much larger in number than the highly skilled professionals. They also typically come from socio-economic backgrounds that make them more likely to remit funds back to their families in Pakistan. Traditionally, government training institutions have lacked the capacity and infrastructure, had serious administrative challenges, and suffered from neglect. The government needs to provide them with adequate resources, at the same ensuring their performance accountability. Still, the public sector will only be able to cater to a fraction of the demand. Public-private partnerships(PPP) and incentives for greater private sector investment in vocational training need to be prioritised. Like for exports and FDI, a specific strategy is required to achieve set targets in terms of upskilling Pakistanis and placing them in markets abroad after catering to domestic needs. Trainings have to be tailored specifically to the need for specific countries with high demand over the coming years. Individuals need to be equipped with the right technical, language and soft skills. The public-private partnerships(PPPs) and private sector investments must be encouraged to become part of the entire value chain from training to facilitating actual recruitment of individuals in foreign markets. Meanwhile, the government would have to ensure that Pakistani labour is accredited in each target market, a process that differs for each country/region and can best be taken up by the public sector because of the upfront costs involved. In parallel, the government should work to secure migration agreements with countries, especially the EU. Countries like India have secured such arrangements through which they get support for preparing migrants for the EU market. There are also opportunities for EU vocational training abroad for specific skills and trades an EU member country may require. Such countries may offer to 19 “Migration Home,” 2025, https://datafest.data.gov.pk/Diaspora/Migration. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 23

train the selected labour themselves according to their requirements. The exporting country only has to meet certain prerequisites – language skills, for example – but the burden of training is shifted to the host country. The starting point for both these models will be a comprehensive exercise by the MOPHRD that is responsible for the country’s labour export. Its effort would have to include: • Identifying countries with declining working-age population and demographic needs • Targeting the most promising sectors and identifying skillsets and trades in which Pakistani labour could be competitive • Creating a specific strategic plan per country with set targets for labour export • Obtaining all necessary certification and accreditations and finalising MoUs for employment and skills development with host country companies/ government • Imparting skills, including language training, and ensuring broader capacity building of the human resource. This will require a detailed analysis of the existing training capacities and the additional needs for each skillset • Devising a strategy and providing incentives to encourage new vocational institutes to be set up through PPPs and in the private sector to cater to the projected demand • Mechanisms to set up recruitment companies in host countries which will become the placement agents for Pakistanis who have been suitably upskilled • Proactive diplomacy and engagement with the host country to secure liberal quotas(where applicable) and ensure a welcoming environment for Pakistanis • Provision of a transparent one-window operation and use of technology for labour to be informed of opportunities abroad, registered, be tested, recruited, and placed abroad 24 Friedrich-Ebert-Stiftung(FES) Pakistan Office

• Execution of accreditation and migration agreements with identified countries/regions as needed An example of aspects to be covered in any country-specific strategy is listed in Table 2. This exercise will need to be conducted for the entire list of prioritised countries. The apex body for the EOI initiative will act as the inter-ministerial coordination and oversight mechanism to ensure that labour export targets are met. Labour Exports: Elements of a Table 2 Strategic Plan for Each Particular Country Sector(s) Skill/Trade/ Profession Country wise sectoral strategic plans for identification, mapping and prioritisation of different sectors, taking into account the domestic supply and capacity Number of skilled/semiskilled and professional workers needed by the country Requirements 1. Recognition of qualification/ occupation 2. Trade/Profession-wise essential qualifications and specific requirements (exams, etc) Implementing Agency/ Key Stakeholders 1. Primary and secondary implementation agencies 2. Setting targets/KPIs for key implementation agencies/stakeholders Timeframe Timeframe for implementation of targets/ KPIs for the respective bodies/ agencies (short, medium, and long term) 3. Language requirements 4. Soft skills requirements 3. Inter-ministerial coordination mechanism 5. Cultural understanding of the destination Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 25

Reimagining Regional Connectivity The regional connectivity pillar of Pakistan’s geoeconomic vision poses an even greater challenge in the transformed geopolitical environment than forging strong development partnerships. However, without making progress on this count, even gains from development partnerships will be stymied. Throughout the formulation process of the NSP, its framers explored whether there was a way to attain economic security without benefiting from the economies of the neighborhood. The interest in this question was natural given the difficulties Pakistan continued to face with its eastern and western neighbours. Ultimately, not only was a sans-region future deemed to be impractical, but Pakistan’s success in becoming the regional connectivity hub stood out as the only realistic way to create genuine positive economic interdependence among neighbours, including India. Hard security options and nuclear deterrence, though imperative in their own right, need to be supplemented with successful execution of cooperative geoeconomics for Pakistan to be able to raise the costs for others to create or tolerate instability in Pakistan. The ideal conception of connectivity, as unpacked in Pakistan’s Geoeconomic Pivot, saw Pakistan harnessing the north-south axis of the China-Pakistan Economic Corridor(CPEC) and complementing this with connectivity with Central Asia through Afghanistan. These two axes would produce optimal results when linked with an east-west axis that connected Pakistan with India and the rest of South Asia. Indeed, for optimisation of the economic interdependence vision, significant improvement in India-Pakistan relations remains a prerequisite. Unfortunately, the recent India-Pakistan crisis has disrupted any such possibility for the time being. Indian Prime Minister Modi has made clear his intention to shun any possibility of dialogue with Pakistan, instead continuing to threaten military action. 20 While Pakistan has continued to act maturely and called for talks to resolve issues, Islamabad cannot afford to put its entire regional framework on hold to cater to New Delhi’s insecurities. 20 “Operation Sindoor: India.” 26 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Tackling India’s Intransigence Under the circumstances, Pakistan has no option but to work on a‘minus India’ regional strategy. In this scenario, Pakistani leaders will need to make a concerted effort to identify common interests with other South Asian countries and tie China into this calculus as far as possible. With India reeling in its relations with virtually all neighbours, Pakistan and China can jointly create cooperation frameworks with each of the other South Asian countries. Signs of movement in this direction are already emerging, with Pakistan, China and Bangladesh having recently launched a trilateral cooperation mechanism. 21 Similarly, additional efforts should be made to enhance trade, transit, and investment relationships with the Central Asian Republics. To be sure, the goal of the proposed approach will not be to counter New Delhi’s interests. It will simply be to benefit from South Asian integration, however suboptimal it may be without India. Ideally, this would force Indian decisions-makers to recognise that far from isolating Pakistan, India is losing by opting out of such avenues. MOFA’s South and Central Asia divisions, and the earlier proposed new division under a special secretary for economic diplomacy must play an outsised role in identifying specific connectivity-related targets with each South and Central Asian country over a 12-24-month time horizon. Relevant ministries and officials within the government, and private sector interests when needed, should be requested to pursue these targets in earnest. While some of the aspects of cooperation with these countries will be political in nature, those dealing with development partnerships and connectivity can be executed as part of the EOI initiative. The EOI apex body can also facilitate the private sector to deliver intended outcomes. To be clear, a‘minus India’ approach should not be Islamabad’s preference. Pakistan must continue to hope that Prime Minister Modi’s government will comprehend the self-defeating nature of its present stance. While prospects do not seem encouraging, Pakistan and India have managed to create openings in the most unexpected of times in the past. Their last formal peace process was initiated at the back of a ten-month long military standoff in 2001-02. Even if New Del hi does not rethink its approach immediately, detrimental as it is for regional inte21 Liu Zongyi,“China-Bangladesh-Pakistan trilateral mechanism boosts regional growth,” Global Times, June 25, 2025, https://www.globaltimes.cn/page/202506/1336965.shtml. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 27

gration, sentiments and policies can evolve with political changes in a country. A post-Modi era in India, whenever it comes about, could offer different opportunities. Even now however, Pakistan should think out of the box vis-à-vis India to pursue its own self-interest through geoeconomics. For starters, Islamabad should consider neutralising the Indian government’s relentless efforts to depict Pakistan synonymously with terrorism to its citizens. A whole generation of young Indians has no other image of their western neighbour but as a poverty-stricken exporter of terrorism. The best way to disabuse them of this concocted perception would be to liberalize visas for Indian citizens, offering them an opportunity to see Pakistan for themselves. Pakistan could start by offering visas to divided families, student visits and exchanges, young parliamentarians could be encouraged to visit under SAARC visas, and religious tourism could be further promoted. Other such avenues for engaging Indian citizens could also be explored. There could also be consideration for provincial level engagements. For instance, Pakistani and Indian Punjab could form joint groups to study and address the largely apolitical issue of smog. Down the line, Pakistan could also consider offering limited transit rights for exports originating in Indian Punjab and destined for Central Asia. With its current mindset, New Delhi is likely to reject all these offers. While unfortunate, this makes these Pakistani overtures zero-cost options and even more logical to pursue. At the very least, Pakistan would have reinforced its measured and mature position towards India. It may lead Indians dismayed by the Modi government’s refusal to accept Pakistan’s offers to question the motives behind the decision. It may also help build some international pressure on India to explain its position, thereby raising India’s diplomatic costs of intransigence. Pakistan’s Western Neighbours A broken relationship with India implies greater need for Pakistan to ensure healthy relations with the other neighbours. The political fluidity in West Asia directly affects Pakistan’s western border in multiple ways. Pakistan’s principal objective throughout has been to stay out of active conflict in the Middle East while ensuring that it avoids taking any diplomatic position that activates Pakistan’s sectarian fault lines. It did so carefully during the 12-day war between Iran and Israel earlier this year. The countries support for U.S. President Trump’s 28 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Gaza peace plan, while risky, also signals Pakistan’s desire to stand with consensus of key Muslim countries without threatening Iran in any way. Apart from this, there is little more one can expect in terms of Pakistan’s interaction with Iran till the West is willing to allow Tehran greater economic integration with its neighbours and beyond. Any opening that allows Iran to do business with its neighbours would be welcomed by Pakistan. Projects like the Iran-Pakistan gas pipeline could then be reactivated immediately. Moreover, ongoing initiatives like the Iran-Pakistan-Turkey freight train that have been operating sub-optimally due to sanctions on Iran can be reenergised. With Afghanistan, the extreme uncertainty in Iran and a complete breakdown of relations with India demands an even more constructive approach that looks to patch up differences between the two countries on the issue of terrorism emanating from Afghan soil. The recent serious escalation of tensions with Kabul does not bode well for the pursuit of regional connectivity. Despite Pakistan’s genuine and well-founded misgivings, Islamabad and Kabul need to reenergise bilateral contacts at the highest levels. A China-Pakistan-Afghanistan trilateral summit in Beijing in May 2025, in which all countries agreed to extend CPEC to Afghanistan, 22 provided a good opportunity to do so. Forward movement requires both countries to de-hyphenate border tensions from cross-border trade and transit and regional connectivity projects. The signing of an agreement between the two sides to lower tariffs on select agricultural products and Pakistan’s recent step of offering Afghan truck drivers involved in trade and transit shipments multiple entry visas are small but positive steps. 23 They need to be used as building blocks for a larger Preferential Trade Agreement that has long been pending. Furthermore, to address concerns among the Central Asian Republics(CAR) about the high cost of doing business through Afghanistan, Pakistan should find ways to support improvement of Afghan transport infrastructure. Given that the Afghan government lacks resources, Pakistan, Uzbekistan (the most affected CAR), and other Central Asian countries could consider establishing a joint fund to upgrade the main trade transport routes inside Afghanistan. 22 Islamuddin Sajid,“ Beijing, Islamabad, Kabul agree to extend China-Pakistan Economic Corridor to Afghanistan,” Anadolu Ajansi, May 21, 2025, https://www.aa.com.tr/en/asia-pacific/beijing-islamabad-ka bul-agree-to-extend-china-pakistan-economic-corridor-to-afghanistan/3575074. 23 Ibrahim Shinwari,“Govt to issue multiple entry visas to Afghan transporters,” Dawn, June 21, 2025, https://www.dawn.com/news/1918523; Mubarak Zeb Khan,“Pakistan, Afghanistan sign trade agreement,” Dawn, July 24, 2025, https://www.dawn.com/news/1926219. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 29

None of this implies that Pakistan should dilute its redline on the use of Afghan soil for terrorism against Pakistan. Pakistani leaders should continue pressing Kabul directly and proactively seek to invoke Chinese influence on the Taliban to push them further to eliminate the Pakistani Taliban’s presence in Afghanistan. However, linking the entire economic relationship to security concerns emanating from Afghanistan risks undermining the regional economic agenda completely and denting the hope and interest among CARs to use Pakistan as one of their key openings to the world. Regional Connectivity Projects China-Pakistan Economic Corridor(CPEC) With regard to regional connectivity, CPEC remains Pakistan’s crown jewel. Its success is essential for Pakistan to have any hope of becoming the regional connector for the wider region and having the building blocks for enhancing export and investment potential in place to create successful development partnerships with the rest of the world. The following steps need to be prioritised: a. Removing delays in implementation of SEZs: Removing project delays, specifically the construction of SEZs, is necessary to boost investor confidence and generate the much-needed momentum for industrial cooperation and uplift. The construction of at least three out of nine planned SEZs needs to be fast tracked by removing existing barriers. b. Early resolution of financial issues with Chinese creditors: Disagreements over payments to Chinese energy companies has been a sore point between the two countries. Pakistan needs to reduce payables for Chinese energy projects in a phased manner. As per media reports, Pakistan was clearing, on an average, about 88% of the invoices on a quarterly basis till late last year. These were generated by 17 power plants, having a generation capacity of 8,020 megawatts. 24 Raising this ratio to 100% will require significant additional resources that the Pakistani and Chinese governments need to negotiate. 24 Shahbaz Rana,“Govt expedites payments to China,” The Express Tribune, October 26, 2024, https://tribune.com.pk/story/2505343/govt-expedites-payments-to-china. 30 Friedrich-Ebert-Stiftung(FES) Pakistan Office

c. Improving security measures for Chinese citizens: This remains an even bigger problem. Pakistan and China should build a consensus on a joint security mechanism to protect Chinese citizens. While on-ground presence of Chinese security personnel in Pakistan is not advisable, joint mechanisms for intelligence sharing and technical support to prevent incidents targeting Chinese as well as joint investigations into any incidents that occur may be considered. d. Inviting other countries to join CPEC: In tandem with addressing specific Chinese concerns and removing bottlenecks in implementation of CPEC projects, China and Pakistan should proactively look to expand the net in terms of CPEC’s membership. A larger number of countries with direct involvement in CPEC suits Pakistan’s objective of creating greater interdependence. Therefore, in consultation with Beijing, Pakistan should look to create incentives for other regional actors to benefit from CPEC’s connectivity. The private sector can also play a critical role in this regard. The Pakistan Regional Economic Forum, one such forum led by the private sector, is already working to bring in multi-faceted private investment from several regional countries. 25 Such efforts can be further harnessed and replicated. Moreover, Pakistan must ensure that CPEC SEZs attract private and public sector investment from multiple Western countries in addition to regional actors to truly make it a melting pot for economic interdependence centered on Pakistan. Finally, existing regional infrastructure can be linked with CPEC for maximum synergies. For instance, the railway track used for the freight train between Pakistan, Iran and Turkey could be connected to the envisioned CPEC rail network. 25 Haroon Sharif,“Leveraging regional connectivity through sustainable private sector investments,” https://preforum.org. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 31

Other Energy and Infrastructure Connectivity Initiatives Virtually all other major regional integration mega projects have hit major snags. While Pakistan must continue to pursue each of these in earnest given their importance to create mutual dependencies across regional countries, they are only likely to reach fruition in the long term. Expectations should therefore be kept realistic, while keeping in mind that the geoeconomic pivot was never meant to be a tactic aimed at short-term gains. It was envisioned as a truly transformational, strategic paradigm shift whose impact will take years, if not decades, to fully materialise. Initiatives should therefore not be abandoned out of frustration with lack of progress. The major projects include: 26 • The Turkmenistan Afghanistan Pakistan India(TAPI) gas pipeline • The Trans-Afghan Railway Project • The Central Asia- South Asia Electricity Transmission and Trade Project (CASA-1000) • The Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan Power Interconnection Project(TUTAP-500) • Possible digital connectivity projects Connectivity Beyond the Region Balancing the U.S.-China Equation Ultimately, Pakistan’s geoeconomic vision is predicated on creating genuine incentives for countries to benefit from Pakistan’s geography and economic opportunities. Managing the larger geopolitical milieu marked by an ever-intensifying U.S.-China competition remains a prerequisite for development partnerships and connectivity to succeed. Positioning Pakistan in ways that prevents it from becoming a proxy battleground for great power contestation is essential to ensure coexistence of all significant countries with Pakistan. 26 For a brief discussion of the main regional integration mega-projects, see Pakistan’s Geoeconomic Pivot, pp. 21-26. 32 Friedrich-Ebert-Stiftung(FES) Pakistan Office

The‘no camp politics’ outlook of Pakistan’s foreign policy emphasised in the NSP still offers the most logical way to achieve this. Pursuing this course, Pakistan has scored significant successes in establishing its value for both global poles in recent times. The India-Pakistan crisis of May 2025 saw China support Pakistan’s military. As the Indian opposition leader quipped on the floor of the parliament:“the single biggest strategic goal of India’s foreign policy[was] to keep Pakistan and China separate.” The crisis“brought them together.” 27 At the same time, the conflict between Israel and Iran has brought Pakistan’s potential regional role to prominence. The Pakistani army chief received unprecedented access in Washington during this 12-day war, including a detailed luncheon meeting with President Trump that signaled a positive reset in Pakistan-U.S. relations. 28 Positive vibes from Washington have continued since. Pakistan needs to maintain a healthy conversation with both U.S. and China. Pakistani decision-makers must ensure they maintain complete transparency with both capitals on their dealings with the other to avoid any misunderstandings that could unravel this delicate balance. This is especially important as both Washington and Beijing suspect that Pakistan is more inclined to lean in the other’s favor. Meanwhile, Pakistan should not shy away from continuing to offer support to both capitals. Ideal from its point of view would be Washington’s and Beijing’s willingness to allow Pakistan in helping lower the temperature between them in the South Asian theater. While it seemed a far cry earlier, the recent unexpected opening between the U.S. and Pakistan and President Trump’s seeming keenness to steer U.S.-China relations away from a meltdown may open up space for such a consideration. 29 Pakistani decision-makers must also ensure their policies cater to both American and Chinese economic interests. CPEC continues to elicit scepticism from the West. But connecting its route to the Central Asian or an east-west South Asian axis will dilute concerns that Pakistan is providing China unfair preferential treatment. The U.S. has an interest in weening Central Asia off Russian de27“Center made strategic mistake, brought China-Pak together: Rahul Gandhi,” Asian News International(ANI), February 02, 2022, https://www.aninews.in/news/national/politics/centre-made-strategic-mistake-brought-chi na-pak-together-rahul-gandhi20220202212852/. 28 Jeff Mason, Saeed Shah and Shivam Patel,“ Trump hosts Pakistani army chief, disagrees with India over India-Pakistan war mediation,” Reuters, June 19, 2025, https://www.reuters.com/world/asia-pacific/india-willnot-accept-third-party-mediation-relations-with-pakistan-modi-tells-2025-06-18/. 29  For an analysis of Pakistan’s potential to do so, see Moeed Yusuf,“Why America should bet on Pakistan,” Foreign Affairs, September 11, 2025, https://www.foreignaffairs.com/pakistan/why-america-should-bet-pakistan. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 33

pendence. The southward transit route through Pakistan is an obvious opportunity to do so. With instability in Iran, there is an added opportunity for the U.S. to divert Central Asian traffic from Iran to Pakistan as well. This, however, assumes a functional economic relationship between Pakistan and Afghanistan. Moreover, avenues for co-investment of Western and Chinese investment in Pakistan should be explored. Acheiving this would signify Pakistan’s success in economic multi-alignment. The most prominent sector where such an effort is already being made is critical minerals. In Balochistan, Pakistan’s mineral rich but restive province, efforts are being undertaken to ensure that U.S. and Chinese interests are accommodated in large-scale, long-term projects. 30 Western multilateral organisations are already supporting some of the key projects. 31 Western companies are also involved, with a Canadian multinational leading investment in the Reko Diq mine, one of the world’s largest undeveloped copper and gold projects. Other partner countries are also being pursued. Should this come to fruition, all these actors will have direct stakes to ensure the area’s security and stability to protect their investments. A collective interest to do so will automatically build greater pressure on countries like Afghanistan to prevent terrorism in Balochistan(and the adjoining Khyber Pakhtunkhwa province) emanating from its soil and put groups like the Balochistan Liberation Army perpetrating much of the violence there on the backfoot. Exploring Middle Power Diplomacy A multi-aligned foreign policy that can integrate the interests of maximum number of influential capitals requires Pakistan to go beyond the two global poles. A concerted strategy to woo a diverse set of middle powers should be considered in light of the evolving global order. Today, a significantly large bloc of important countries is seeking to avoid being forced to make a binary choice between the U.S. and China. None of them want to test the pain of recalibrating their economic partnerships and integration patterns in the global economy. All of them would prefer to work with both great powers. Proactive economic and/or strategic integration that offers both the U.S. and China real or perceived bene30 Munir Ahmed,“ Pakistan seeks billions in investment as it promotes its minerals sector,” The Associated Press, April 09, 2025, https://apnews.com/article/pakistan-hosts-international-mines-minerals-summit-0ac2f697f2 479fc52f3fb82723a9062b. 31 Ariba Shahid,“Barrick’s Reko Diq project in Pakistan aims new financing,” Reuters, April 8, 2025, https://www. reuters.com/markets/commodities/barricks-reko-diq-project-pakistan-aims-new-financing-2025-04-08/. 34 Friedrich-Ebert-Stiftung(FES) Pakistan Office

fits without crossing either’s red line is likely to be the most assured way forward for these countries. Their interest to do so aligns perfectly with Pakistan’s vision to expand its development partnerships and include other countries into its trade, transit and investment ambit. From ASEAN countries in the East, Uzbekistan and Kazakhstan in Central Asia, Pakistan’s traditional Gulf partners and Turkey in West Asia, much of Europe, African power houses like Egypt, Nigeria and South Africa, to countries like Brazil and Mexico, Pakistan can explore issue-based partnerships that tie in specific political and economic interests of these middle powers with Pakistan’s. Multiple new opportunities could open up. For instance, Europe will be looking to a new future that is not completely dependent on U.S. leadership and support. As it redefines its partnerships, it could potentially recalibrate its approach towards countries like Pakistan, including conditions under which it offers GSPplus, new bilateral trade arrangements, and the like. There may also be fresh opportunities for Pakistan to relocate foreign companies in China affected by U.S. sanctions. Several middle powers may still be willing to benefit from these companies working out of Pakistan given the low production costs. Pakistan could even consider consulting with China on whether it makes sense to work towards approaching countries(minus India for now) in the India-Middle East-Europe Economic Corridor 32 to connect with CPEC – thereby transforming two competitive visions into a cooperative one. Creating fresh space with middle powers may also help overcome Pakistan’s absence in effective regional trading arrangements. Since India’s economic rise, New Delhi has managed to use its clout to keep Pakistan out of virtually all promising economic blocs in Asia. Pakistan has had to depend on Free Trade Agreements, often lopsided in the partner’s favour and difficult to sustain in the absence of efficient, transparent and fast dispute settlement mechanisms. While the abrupt shift towards protectionism triggered by the world’s most powerful economy has signaled a clear preference for bilateralism over economic blocs, regional powers are likely to continue investing in multilateral trading partnerships while adjusting to the reality of U.S. tariffs. Pakistan stands to gain by partnering with such countries. 32 The India-Middle East-Europe Economic Corridor is an initiative aimed at reshaping global trade, connectivity, and cooperation across three continents. It is quite evidently designed to create an alternative to China’s Belt and Road Initiative. For more information, see the initiative’s website: https://www.imec.international/. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 35

Enabling Geoeconomic Success through Soft Power Projection Even a cogent strategy to achieve development partnership(and connectivity) related goals is likely to underperform unless Pakistan is able to address its negative international perception, especially in the West. This rather jaundiced outlook deters foreign governments and the international private sector from engaging with Pakistan freely, or even accepting Pakistan’s signals of intent to involve Western countries as critical partners in its broader economic security agenda. Pakistani leaders must recognise that despite momentary gains in terms of general appreciation for Pakistan’s maturity in its recent dealings with India and positive vibes from Washington since, Pakistan has a long way to go in reversing the negativity associated with its brand. Strategic communication built around the essence of the NSP could help reinforce Pakistan’s new focus on cooperative geoeconomics, the opportunities this vision offers to the world, and the country’s commitment to ensuring zero conflict in its region. The objective of such outreach will not be limited to promoting Pakistan’s economy. A larger barrier has to be broken – one that entails Pakistan’s overall perception as a troubled and troubling country with an Islamist problem. Development partnerships and regional connectivity will not come about if global traders and investors perceive Pakistan to be unsafe and unstable. Mere statements and public relations pitches will not dent this long-standing outlook towards Islamabad. Pakistan’s best chance to reverse this is by truly opening itself up to outsiders – allowing them to experience the on-ground reality themselves. Pakistan is fortunate to have a culture of hospitality, history, and traditions that never fail to impress those exposed to it. Its functionality as a state and society is also far less concerning than years of critical international media reporting would have one believe. Allowing outsiders to see and feel this reality should therefore be a priority. To do so, decision-makers will need to move beyond a restrictive security mindset. Tourism is already a priority sector but the facilitation required to make it successful is lacking. The visa regime has been liberalised but simple hurdles like lack of multiple entry options and long delays due to security clearances in categories like student visas continue to linger. 36 Friedrich-Ebert-Stiftung(FES) Pakistan Office

Global youth should be a key target audience if Pakistan is looking to create a positive buzz around the world. The state needs to consider initiating traveling Pakistani art and culture exhibitions at international museums, cuisine fests, and the like to promote Pakistan’s image beyond its more established hard security credentials. The government should partner with international organisations to promote Pakistan’s diverse, young and vibrant art and cultural scene and contemporary music, and engage bloggers and vloggers. It should also encourage universities to expand student exchange programs. Moreover, decision-makers should consider making Pakistan, especially Islamabad, Karachi, Lahore, and select northern areas, regional conference venues for international events. Trade and investment fares should be organised in Pakistan rather than in third countries. Several regional countries like Sri Lanka, Nepal, and Thailand have become global magnets for such activities. These inevitably bring influential individuals across various sectors and, over time, help shape positive narratives in the visitors’ sphere of influence in their home countries. Finally, ease of doing business is intrinsically linked to the ability of companies and individual investors to establish local presence, freely visit, and comfortably engage with their business concerns on the ground. Pakistani authorities should invite foreign companies as well as organisations like regional chambers of commerce to set up offices in Pakistan. Select geographical zones can be designated where they are afforded a normal, stress-free environment rather than protection through overt security details. Requirements for their presence in Pakistan should be streamlined, ensuring that they do not have to deal with unnecessary hindrances and bureaucratic red tape. Like the EOI, an internationally-oriented communication strategy will require a whole-of-government effort to conceive and execute. The Ministry of Information and Broadcasting is the natural government entity to lead the effort. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 37

Conclusion The future of cooperative geoeconomics in Pakistan will continue to be contested. More and more voices influenced by the geopolitical chaos and deteriorating regional dynamics will question its utility. These are not unfounded concerns. The fluidity in international politics will require constant analysis, agility, and reconsideration of policy choices. Still, it will be extremely dangerous to discard a particular strategic course of action without having a viable alternative. Alternatives will not be easy to come by. Virtually all options were examined at the time of formulation of the NSP but none was deemed to be realistic. And yet, it is entirely logical, in fact necessary, for public intellectuals to continue discerning alternate options or need for revisions within the existing geoeconomic paradigm. This will only make the debate, and future policy choices, healthier. The worst outcome would be if the country is notionally committed to the geoeconomic vision but only implements it piecemeal while remaining unable to agree on and pursue an alternative. It will leave Pakistan in a reactive mode in protecting its equities. Doing so risks putting Pakistan squarely in the eye of the storm of great power contestation. This was precisely the situation the framers of the NSP sought to avoid. While internal debates and search for alternatives can continue, for now, Pakistan should not only remain focused on implementing the geoeconomic vision but also project it through a smart, globally-oriented communication strategy. 38 Friedrich-Ebert-Stiftung(FES) Pakistan Office

About the author Moeed W. Yusuf is the Vice Chancellor of Beaconhouse National University, Pakistan. Yusuf is also a Senior Fellow at the Belfer Center for Science and International Affairs at Harvard University’s Kennedy School. He previously served as National Security Adviser(NSA)/Special Assistant to the Prime Minister of Pakistan with the rank of Federal Minister. He was Pakistan’s youngest NSA and is credited with leading the process of formulating the country’s first-ever National Security Policy. As NSA, Yusuf was responsible for advising the Pakistani leadership on all aspects of national security and was engaged in conducting national security dialogues with counterparts around the world. Acknowledgements: Multiple individuals have supported my research for this publication. I wish to thank each of them for finding this endeavor worthy of their time. I am also grateful to all those who provided valuable data and information on current policies of the government, without which it would not have been possible to conceptualize the report. I also owe gratitude to the Friedrich-Ebert-Stiftung team for their editorial support. Implementing Pakistan’s Geoeconomic Pivot Amidst Geopolitical Chaos 39